DEFENDING YOUR PROFESSIONAL INTEGRITY
Stay current on recent changes in the regulatory environment
Financial advisors and broker dealers (at least those that are not looking to exit the industry due to the DOL rule) are all hastily preparing for implementing rules to comply with the new fiduciary standard. You can find the first set of guidance from the DOL here.
As the financial industry is concentrating on the best ways to protect the clients, FAs need to spend some time looking past the implementation phase and keep an eye on a couple of the collateral effects of the DOL rule - attrition and consolidation.
The UK proposed the Retail Distribution Review (RDR), which is similar to the DOL fiduciary rule, in 2011 and began enforcement in 2013. Over that time period, nearly 25% of financial advisors left the industry. Although it is impossible to foresee the exact number the US will show in attrition over the next few years, we can all agree that increased regulation will put pressure on many brokers that will be unable to compete in the new framework. However, advisors exiting the business mean nothing to customers that must still find a trusted place to land with their money.
For those that remain, there will be a huge opportunity to scoop up clients that are looking to receive advice from an accomplished broker or RIA. Clients must take their assets somewhere and they will be seeking out referrals. Obviously, FINRA will further push their BrokerCheck model (which they have already mandated websites be linked to) as a necessary first-step in a customer’s selection process. With a quarter of advisors no longer in business, the remaining FAs will look to compete against one another to absorb and add large sums of assets under management. Those brokers correctly positioned for this regulation should be able to leverage this “new normal” into a large and solid platform for their practice.
Now is the time for an advisor to ensure that the perception of their practice, and indeed their reputation, are as perfect as can be. Potential clients can make quick decisions from first impressions. For those customers that go to the internet first to research, having a BrokerCheck profile with customer dispute disclosures may be the quickest way out of gaining that new client. People have limited time to properly vet every professional they may work with. They may give little credit to whether a previous customer dispute was “denied” or “closed-no action” or “settled” assuming that where there is smoke, there is fire. A long list of disputes, whether with merit or not, will be an easy way for a customer to exclude that broker.
AdvisorLaw specializes in getting frivolous or meritless customer disputes expunged from BrokerCheck and your CRD for good. With the DOL rule taking effect in less than six months, those advisors that want to reap the rewards for being here when the consolidation dust settles should look to clean up these blemishes on their record immediately.
EA, Executive Vice President
3400 Industrial Lane, Unit 10A
Broomfield, CO 80020
This blog is my ongoing effort to inform and educate FINRA licensed professionals about the evolving regulatory ecosystem in which we operate.